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Company WXYZ manufactures and sells only four products: [#permalink]
09 Jul 2011, 17:35
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Company WXYZ manufactures and sells only four products: widgets, xylophones, yo-yos and zippers. For the past four years, the company has operated profitably. During that time, it has incurred thirty per cent of its costs manufacturing and distributing xylophones. During the same four years, sales of widgets, yo-yos and zippers have accounted for sixty per cent of the company's revenue.
Which of the following is most strongly supported by the paragraph above?
A. Zippers are more expensive to manufacture than xylophones. B. Xylophones are the most profitable products produced by WXYZ. C. Revenues from the sales of yo-yos exceed the costs of producing them. D. The company's profit margin on xylophones exceeds twenty-five per cent. E. The revenue of Company WXYZ has not increased in the last four years.
I will go with D , as all other options can be neglected because :
A.From original question stem widgets, yo-yos and zippers all constitute 60% and it is no mentioned which carries how much waitage . B.Says Xylophones are the most profitable, which is not clear as the revenu share of the other three products is not given. C.Irrelivent as neither cost price nor revenue share is given E.Not mentioned in the question stem D> That leaves D
Re: Company WXYZ manufactures and sells only four products: [#permalink]
24 Dec 2011, 20:38
(D) is the answer. Costs_Xylophone=30% of total cost. Revenue_xylophone=40% of total revenue. Total cost<Total revenue (since company operating profitably). If total cost = total revenue, profit margin of xylophones=25%. Thus, profit margin of xylophones>25%. (B) is the red herring. Who knows what is the exact breakup of costs and revenues in the grouping of widgets, yo-yos and zippers. For eg., yo-yos can contribute 15% of total revenues and only lead to 10% of total costs. This implies a minimum profit margin of 33.33% (greater than xylophones)...
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